Vivek Dehejia, Resident Senior Fellow at IDFC Institute, writes on the political economy of trade policy in this Livemint article. Dehejia speaks of this issue through his participation in a conference held at Columbia University in New York, organised by economist Jagdish Bhagwati.
"They (Krishna, Panagariya and Bhagwati) have focused attention in recent years on the baleful rise of preferential trade agreements (PTAs) which threaten to fragment a world trading system premised on rules-based, multilateral liberalization...Economists are right to point to the distributional impacts of trade liberalization, as I have done myself in this column, and politicians are right to worry about these impacts. But this is entirely consistent with supporting trade liberalization as being in the national economic interest. The crucial element that makes these two statements logically consistent is that trade liberalization brings aggregate economic gain even in the presence of distributional impacts. It remains to be argued, therefore, that the losers must be compensated, which ensures that everyone gains, or, at any rate, that no one loses—the classic Pareto principle of economics. The wrong conclusion, but one that lazy folk may grasp at, is to call into question the gains from trade liberalization tout court."
Read the full article here.